Sven has a full-time job as an electrical engineer for the city utility. In his spare time, he repairs electronic gear in the basement of his personal residence. Typically, the items are dropped off at Svens house and later picked up by the owner when notified that the repairs have been made. The floor space of Svens residence is 2,500 square feet, and he estimates that 20% of this is devoted exclusively to the repair business (i.e., 500 square feet). Gross income from the business is $11,000 expenses (other than home office) are $7,000. Expenses relating to the residence are as follows:

Real property taxes $4,500

Interest on home mortgage $7,000

Operating expenses of residence $2,000

Depreciation (based on 20% business use) $500

a. What is Sven's net income from the repair business if he uses the regular (actual expense) method of computing the deduction for office in the home?

b. What is Sven's net income from the repair business if he uses the simplified method of computing the deduction for office in the home?

b. What is Sven's net income from the repair business if his gross income from the business is $10,000 rather than 11,000?